Kenmare Resources : Trading Update

Kenmare Resources plc ("Kenmare" or "the Company")

30 January, 2013

Trading Update

Overview

• 2012 production: 772,300 tonnes HMC; 574,400 tonnes ilmenite and 46,900 tonnes zircon
• 680,800 tonnes of finished products shipped in 2012
• 40% increase in revenue to US$234.5 million (unaudited) in 2012 from US$167.5 million in 2011
• Global titanium feedstock inventories are depleting and demand outlook improving
• Expansion commissioning underway

Kenmare Resources plc provides the following update with respect to production, market conditions, and commissioning of the expansion at the Moma Mine.

Operations
Total production of Heavy Mineral Concentrate ("HMC") for 2012 was 772,300 tonnes.  Finished product volumes for the year were: 574,500 tonnes of ilmenite and 46,900 tonnes of zircon (including 20,000 tonnes of a secondary zircon product).  680,800 tonnes of finished products were shipped in 2012, compared with 730,400 tonnes in 2011.  These shipments generated revenues of US$234.5 million (unaudited), an increase of 40% from US$167.5 million during 2011.

Mining operations produced 157,000 tonnes of HMC during the fourth quarter, compared with 229,100 tonnes in the third quarter.  Kenmare's market update dated 28 November 2012 highlighted the likelihood of reduced quarter-over-quarter production due to a combination of electricity supply disruptions and geotechnical challenges associated with elevating the dredge pond from the Namalope Flats zone to a dunal plateau. Once on the dunal plateau, Wet Concentrator Plant A ("WCP A") will operate there for the next 12 years until it moves to the Nataka ore zone.  Supplemental dry mining improved delivery of ore to the WCP A, but electrical supply volatility and geotechnical challenges were such that production was reduced. In the fourth quarter, the Mineral Separation Plant ("MSP") produced 123,600 tonnes of ilmenite and 10,600 tonnes of zircon, which represents a reduction in MSP output from the previous quarter due to lower tonnes of available HMC. Shipments of finished products in the fourth quarter were 204,000 tonnes, up from 155,300 tonnes shipped in the third quarter, representing the second highest quarter on record since operations commenced.

The transition to the dunal plateau will be substantially completed by the end of the first quarter 2013.  Kenmare has been working with Electricidade de Moçambique ("EdM") to improve the stability of the electricity supply and is presently completely refurbishing a Static Var Compensator (a voltage stabilisation system) on the national electrical grid at EdM's Alto Molocue substation.  Kenmare is also installing capacitor banks at Alto Molocue and at the provincial capital, Nampula.  These measures will better insulate the mine from power disruptions occurring on different transmission lines within the national grid system.  In addition to these steps, Kenmare is installing another voltage stabilisation system at the mine site substation, which will reduce the effect of power surges or dips that get through the other protection devices on EdM's transmission system.

Half-yearly production and shipments during 2012 are summarised as follows:

	H2	H1
	tonnes	tonnes
Production
Heavy Mineral Concentrate (HMC)	386,100	386,200
Ilmenite	297,700	276,700
Zircon	23,300*	23,600**
Shipments	359,300	321,500
* Includes 8,400 tonnes secondary zircon product
** Includes 11,100 tonnes secondary zircon product

Kenmare is committed to a safe and healthy work environment for all personnel.  The health and safety record for the operation remains positive, with the current lost time injury frequency rate at 0.33, compared to an industry average of 0.39.  This is indicative of the continuous collective effort of all employees in the strong promotion of health and safety at all levels of the Mine organisation.

Expansion
Kenmare has commenced the commissioning phase of its 50% expansion of the facilities at Moma.  Facilities include a new Wet High Intensity Magnetic Separation ("WHIMS") Plant, a new Auxiliary Ilmenite Plant, a brownfields enhancement of the existing non-magnetic circuits in the MSP, a new dredge and a new Wet Concentrator Plant ("WCP B") located in a second dredge pond.  Early stage commissioning is underway in the Auxiliary Ilmenite Plant, the WHIMS Plant and the dredge.  Final preparations are underway for the floating of the WCP B and dredge.  Installation of remaining piping will continue concurrently with various commissioning stages culminating in hot commissioning at the end of the first quarter.  The production ramp-up will follow, leading to full production later this year.

Market
2012 was a year of contrasting halves for the titanium feedstock industry.  During the first half, demand for titanium feedstocks was very strong and prices grew steadily.  However, as the painting season in the second quarter was weaker than expected, pigment producers felt the impact of holding excess finished goods inventories. This was addressed with a curtailment of production by most pigment producers that commenced mid-year, which led to reduced demand for feedstocks from the pigment producers and some downward pricing pressure.  High grade feedstocks in the second half of 2012 were impacted more acutely as pigment producers re-configured their feedstock blends to utilise a higher percentage of lower cost feedstocks such as slag and ilmenite.  Despite overall weaker feedstock demand from pigment producers, demand for ilmenite was more resilient than feedstocks in general, and Kenmare was able to sell more than it produced in 2012 at significantly higher prices than in 2011.  Year-end inventories were drawn down to low levels as a result.

The titanium feedstock inventory destocking process is still underway as pigment producers continue to deplete inventories to more normal levels.  However, underlying demand, which is closely correlated to world GDP growth, is expected to improve as global economic conditions strengthen during 2013.  Given improvements in the real estate market and automotive manufacturing in the United States and the stabilisation of economic activity in China, Kenmare expects stronger market conditions to emerge with an improving pricing outlook for feedstocks during the course of this year.

Global zircon market conditions were challenging during 2012. Consumption was weak due to significantly reduced demand primarily from the ceramics sector. This was driven by the slowdown in construction activity in China and weak economic conditions in Europe. Additionally, zircon consumers started 2012 with high inventory levels on the expectation of continued supply shortages. However, faced with slower demand for their products, zircon consumers took a cautious approach to buying as 2012 progressed. Prices held up well initially but reduced sharply during the fourth quarter. Whilst this trend has continued into 2013, there are some tentative indications that prices may be close to stabilising.

Kenmare, with its relatively small production volume, was able to sell all of its zircon during 2012 at the prevailing market price. With a stronger economic outlook expected in China during 2013 and completion of the de-stocking cycle in Europe, zircon demand growth is expected to resume in 2013. The readjustment of market prices that has taken place should help to reverse the downward trend in consumption seen over the past 12 to 15 months.

Financial
The increase in revenue to US$234.5 million (unaudited) in 2012 from US$167.5 million in 2011 was principally a result of increased ilmenite prices. Compared with the previous year, average ilmenite prices realised were 98% higher in 2012 and were up 17% in the second half of 2012 compared with the first half of the year. Average prices for primary zircon products increased in 2012 by 9% compared with 2011, but dropped by 32% in the second half of 2012 compared with the first half year.  Product volumes shipped in 2012 declined by 7% compared with 2011, resulting from reduced production levels.  There has been some increase in operating costs, particularly in the second half of 2012 as the mine pond was making the complex transition up to the dunal plateau, and cost control remains a key priority for management.

As the expansion completes, Kenmare is engaging with the remaining contractors in order to manage the close-out of the contracts and related costs. Given the extension of the time required to complete the expansion as previously advised, and the attendant impact on costs, Kenmare has successfully concluded an agreement with its lending banks to extend the period during which operating cashflow generated by the Moma Mine can be used to fund the expansion costs from 15 December 2012 to 30 June 2013. This agreement also provides Kenmare the flexibility to raise up to US$40 million of additional debt. Loan payments will continue to be made in accordance with obligations under the finance documents. At 31 December 2012, the net debt position was US$279 million.

For further information, please contact:

Kenmare Resources plc.
Michael Carvill, Managing Director                                             
Tel: [phone]                                                                             
Mob: + 353 87 674 0110                                                            

Tony McCluskey, Financial Director
Tel: [phone]
Mob: + 353 87 674 0346

Virginia Skroski, Investor Relations Manager                              
Tel: [phone]                                                                  
Mob: + 353 87 739 1103                                                            

Murray Consultants                                                                   
Joe Heron                                                                                    
Tel: [phone]                                                                  
Mob: [phone]                                                             

Tavistock Communications
Jos Simson / Mike Bartlett
Tel: [phone]
Mob: [phone]

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